The UK is becoming a tax haven for multi-nationals at the expense of domestic shopkeepers

Business rates, combined with a collapse in retail demand as Government creams
off disposable income to reduce its debt, are daily wiping out towns,
communities, thousands of retailers, investors and - through pension funds -
pensions

Business Rates have risen so far out of line with rents that rates can account for 80 to 90pc and in some cases over 100pc of rent payablePhoto: Alamy

By Rodney Atkinson

7:00PM BST 25 May 2014

As a self employed businessman from generations of entrepreneurs I am used to being taxed “till the pips squeak” as a British Chancellor once proudly boasted. But even I have never come across such an iniquitous tax as business rates, paid at excruciating and ever increasing levels on premises which are declining in value, on premises which produce no income at all and which in my case has seen my income decline by 60pc while my tax has risen by 60pc. I am typical of businesses in the North - or indeed in regions outside London and the South East.

Businesses have contracted, their employees have been sacked, their returns have fallen off a cliff - but the business rates on their premises have continued to rise as the politicians who presided over the financial collapse force the innocent to pay for their failures. Nowhere is the devastation greater than on the High Street where business rates are destroying shop keepers and landlords and the savings of those who have invested in their local communities. The solution to the crisis cannot wait for an overall review of business taxation.

In 2012 Local Government raised over £1bn in rates levied on empty properties a rise of 19pc on 2010/2011, in the midst of the worst recession for over 100 years. Since for example high street vacancies in the North are more than twice the level of London we can see how this tax is making the disastrous North South divide even worse. Business Rate levels (which continued to rise throughout the recession) and even rates revaluations bear little relation to retail market reality. Revaluation every five years is designed to “ensure bills paid by any one ratepayer reflect changes over time in the value of their property relative to others”. But the 2015 revaluation, which might at least have rebalanced rates levels between rich and poor, north and south and in-town and out of town, has even been postponed bringing economic destruction to many retailers, subsidy to others, exacerbating the north south divide and bankrupting many landlords.

Business Rates have risen so far out of line with rents that rates can account for 80 to 90pc and in some cases over 100pc of rent payable. In other words the Government is effectively becoming a joint landlord - indeed the dominant “shareholder”! For empty properties the situation is even more catastrophic as a tax supposedly based on rentable value is applied where no rent is paid at all.

As the recession devastated businesses the Government actually reduced the empty rates allowance from 12 months to three months - as if landlords did not want to let their properties and re-imposing the rates burden would force them to do so. Landlords are forced to pay business rates on assets where no business is being carried out. They are forced to pay a tax on assets which have negative income. On no other asset class and on no other profession is such a crippling and unjust burden placed.

Amid the destruction of real businesses there is even a group who never pay business rates at all - the charities - whose management often enjoy good salaries and perks, comparable or even superior to the remuneration enjoyed by shopkeepers, businessmen and landlords whose rates rise to compensate for the nil rates paid by charities. In addition charity shops rely on poorly paid or even volunteer shop staff, unlike the staff employed by business rates payers. In several of the worst hit towns, as commercial rates have driven out shop keepers and landlords the only buyers are the Charities, effectively subsidised by the taxes on empty shops.

Even had there been no recession, Business Rates no longer reflect the reality of the High Street whose business has been subsidised away by Councils and central government to soul-less, “community free” retail parks, where parking is free, where roads have been provided, where planning is very accommodating and where rates do not reflect the distorted balance between in town and out of town shopping. Indeed there is even an 18 month rates exemption for new builds which naturally favours such developments – competing with the high street where the empty rates exemption has been reduced.

Just as Government does not move with the times when it comes to new rental values, so it has failed to grasp the revolution in retail. Nothing is so unbalanced in retail as the contrast between the online retailer and the high street shop. Either the extremely profitable (often tax avoiding and supranational) online retailers must share the burden of business rates or business rates should be abolished.

The major retailers are exiting the secondary shopping streets but as one expert said: “Rents will fall to new market levels which will allow landlords to attract new occupiers into their space – coffee shops, restaurants, convenience food and, increasingly, discount retailers,”. But as we have seen rents are only half the story since Government business rates are not only not falling, they continue to rise. Tenants, having the whip hand, then force rents down even lower to compensate for the excessive rates burden.

Between 2012 and 2016 Business Rates revenue is due to rise by 18pc to £29.6bn (which will include rates on empty premises) while corporation tax revenue is due to fall by 18pc (despite increased corporate profits across the economy as a whole). Making the UK a tax haven for multi-nationals on the backs of domestic shopkeepers and high street investors is not a noble enterprise. With such (for them) profitable taxation policies in the midst of a crisis of their own making what incentive does Government have to solve the crisis? It actually pays the State to destroy the rate payer - or so the Ministers responsible seem, by their inaction, to be saying.

A minister writes to me that the higher rates burden on empty properties was introduced by the Labour Government but this Government needs to cover the deficit - even if that means taxing multinationals less and domestic property owners more. In 2012/13 sales in Kensington & Chelsea and the City of Westminster brought in £708m in stamp duty – £73m more than Scotland, Wales, Northern Ireland, the north-east, the north-west and Yorkshire and the Humber put together. This windfall should be used to extend the empty business rates allowance to 12 months.

There is a pervading myth among the public and the press - and therefore among politicians - that landlords are big and rich and tenants are small and poor. But on the high street individuals like myself often have as tenants corporations whose capital is more than 1000 times greater than our own. Even the bigger fund managers would struggle to match the value of a supranational retailer and even the Government, despite its monopoly of law making and tax raising has shown itself remarkably weak in making those companies pay tax in the UK.

These factors, combined with a collapse in retail demand as Government creams off disposable income to reduce its debt, are daily wiping out towns, communities, thousands of retailers, investors and - through pension funds - pensions. The Government must immediately restore the 12 month empty rates allowance, instigate the rates revaluation and as soon as possible either replace business rates with corporation tax rises (forcing footloose multinationals to actually pay them!) or spread a much lower level of business rates across all retailers - whether charities, on the high street or online.